To ask the Chancellor of the Exchequer (1) what would be the level of value added tax required if education, the police and the fire service, currently in part funded by local authorities, were funded from this source;(2) what would be the basic rate of income tax if it had to cover expenditure at present met by local authorities on education, the police and the fire service.
[holding answer 23 April 1990]: If local authorities spent in line with total standard spending in England and Wales, and total current expenditure in Scotland, the total cost of education, the police and fire service (including civil defence) in 1990–91 would be around £24 billion. If this expenditure were transferred to central government with no change to revenue support grant and specific grants for the police and fire service eliminated, this would imply additional expenditure of around £21·5 billion. This is equivalent to an increase of around 14p in the basic rate of income tax.The estimated revenue from VAT in 1990–91 is £32·1 billion. For each one percentage point increase in the VAT rate, the extra revenue yield is around £2 billion in a full year.